QEP Midstream Partners, LP (ticker QEPM) is currently out on its IPO roadshow and looking to raise $400 million by selling 20 million common units (before the over-allotment) at a mid-point price of $20 with an indicated mid-point yield of 5.0%. They expect to price the deal Thursday August 8.

IMPORTANT: QEPM will provide investors with a K-1 (instead of a 1099-DIV), which makes QEPM appropriate for taxable accounts. Here is the key language from the “Tax Risks” section of the Prospectus (page 53) telling you that it does not really belong in an IRA (or any tax advantaged account):

Tax-exempt Entities and Non-U.S. Persons Face Unique Tax Issues from Owning Our Common Units That May Result in Adverse Tax Consequences to Them.

Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units.

Dear Phil,
Coming in unlevered and with the hot IPO spree this year give this Co. a potential upside would you agree? I especially like that they are mainly fixed-fee funded w/ a majority of their contracts w/ 7+ years remaining. They only need to acquire some assets (for which they have roughly $5.8 million for and most of which will likely be drop-downs from QEP). I think this is a solid investment w/ possible distribution growth, just wondering your thoughts. Thank you,
Matt